A limited company I work for has two directors. They both take a salary over £60,000 and the company has made a £60,000 net profit and they are wanting to take a dividend instead of the full salary. What is the tax implication for each director as an individual?
Within the basic tax band there is no tax to pay on dividends individually. Beyond that they would pay 25% tax on the dividends taken.
The question is, is the dividend in additional to the salary already taken or will the dividend be taken instead of the salary. As dont see how you declare a dividend after you have already processed salary.
Generally speaking if you taken up to the basic rate income, currently about £42.5k, then you are best to take a smal salary to get your benefits and not pay any tax or NIC and get tax relief through the company and take the balance as dividends. Beyond the basic rate level it is a case of crunching the numbers to see what is best option.
Thank you for this information, it is pretty much as I suspected. Only salary paid in 2011/2012 but are looking forward to 2012/13 and paying thr directors their dividend and taking a lesser salary.
